The New Year signals the
universal practice of resolving to break bad habits. Many people focus on
health when making resolutions. They want to lose weight, exercise more or stop
smoking. But financial stress can take a toll on your physical and emotional
well-being, too. You can make 2014 your fiscally fittest year yet by kicking
these bad money habits.

Bad Habit: Spending Without a Budget

Paying attention to cash flow
makes you more mindful of purchasing habits and associated debt. Yet a Gallup
poll conducted earlier this year found that two-thirds of consumers do not keep
a budget to track income and expenses. It is no real surprise, then, that another
survey found that half of Americans spend more than they earn.

Break It: Budgeting
need not be a complex process. Take a look at your last three months of credit
card and bank account statements to get an idea where your money is going.
Subtract your regular monthly expenses (mortgage or rent, utilities, groceries
and credit card bill amounts) from your monthly income (wages, child support
and other sources of revenue). Use this info to create a monthly budget. Figure
out what expenses you could cut, and set goals for savings. Track your spending
every month to ensure you stay within budget. Free online money-management
programs like Mint can make budgeting
easier.

Bad Habit: Carrying a Credit Card Balance

In the United States, 39
percent of people carry credit card debt. Households that carry debt owe, on
average, close to $15,000. The interest rate on most cards averages 15 percent,
and many percentages reach into the 20s and 30s. That amounts to many
households paying more than $1,000 in interest annually.

Break It: Try
the snowball method to pay down debt. Pay the monthly minimum balance on all
debts except for the one with the smallest balance. Each month, apply as much
money as possible to the card with the smallest debt until it is paid off (keep
making minimum payments on the other cards). Once the smallest balance is
eliminated, use the same approach to tackle the next smallest balance. Continue
this way until everything is paid off.

Alternatively, try the avalanche method. Make minimum payments on each debt except the one with
the highest interest rate. For that, pay the minimum plus any extra you can
afford. Repeat this process every month until that debt has been paid off.
Then, keep paying the same monthly total – but take every dollar you were using
to pay off the highest-interest debt and put that towards paying off the debt
with the second-highest interest rate. Keep following this strategy until
you've cleared away all debt.

Bad Habit: Not Saving for Emergencies

Everyone should save at least
six months' worth of living expenses. The goal is to have money available to
cover expenses such as rent or mortgage, car, utilities and groceries when
faced with an unexpected and potentially costly event like a health crisis or
job loss. Unfortunately, almost a third of Americans do not have an emergency
fund.

Break It:
Start an emergency fund or bolster your existing one by saving in incremental
amounts. If you can set aside $25 a week, you will save $100 by month's end. At
the end of the year, you will have saved $1,300. Treat your weekly savings goal
as a bill and make paying it a part of your regular budget.

Bad Habit: Ignoring Your Retirement

The average consumer saves
about 6 percent of his or her annual salary in a retirement plan. That is not
nearly enough. In general, people in their 20s and 30s should strive to save 10
percent of their annual income. That amount doubles when you are in your 40s
and 50s. And you should continue saving as long as you are working.

Break It: If setting aside 10 to 20 percent of your income seems like
too much, consider bumping up your contribution by 1 percent a month, or every
other month, until you get there. At the very least, you should be saving
enough to get the full employer match (if you are working for a company that
offers one). Up to 20 percent of workers do not enroll in their
employer's retirement plans. If your employer matches a portion of your
contributions, not participating is giving up free money.

Andrew Housser is a co-founder and CEO of Bills.com, a free one-stop online portal where consumers can educate themselves about personal finance issues and compare financial products and services. He also is co-CEO of Freedom Financial Network, LLC providing comprehensive consumer credit advocacy and debt relief services. Housser holds a Master of Business Administration degree from Stanford University and Bachelor of Arts degree from Dartmouth College.

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